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Gemstar Seafood Ltd v Bycroft [2001] SBHC 173; HCSI-CC 370 of 1999 (3 July 2001)

CC No 370, 99, HC

IN THE HIGH COURT OF SOLOMON ISLANDS

Civil Case No 370 of 1999

GEMSTAR SEAFOOD LIMITED

-v-

ROBIN BYCROFT

High Court of Solomon Islands
(Muria, CJ.)
Civil Case No. 370 of 1999

Hearing: 22 February 2001
Ruling: 3 July 2001

C. Ashley the for Plaintiff
J. Sullivan for Defendant

MURIA CJ: In this action, the plaintiff claims an order that the defendant or his solicitors withdraw the advertisement published in the Solomon Star Newspaper on or before 12 November 1999, and further an order restraining the defendant from accepting any offer as a result of the said advertisement. The plaintiff also seeks an order that the defendant has breached the Deed of Acknowledgment of Debt and Foreberance (the Deed) and Land and Titles Act (the Act). It also seeks damages and costs against the defendant.

By his Defence the defendant denies the allegations contained in the Statement of Claim and counter-claims (by leave of the Court) in the sum of AUD410,000.00 as a debt due and owing to him from the plaintiff. The defendant also seeks a declaration that it is entitled to sell the parcel of land, Parcel Nos. 097-005-93 and 097-005-147 pursuant to the Power of Attorney No. 226. Interest on the sum of AUD410,000.00 has also been claimed by the defendant.

Brief background of the case

It is worth setting out the brief background of this case in order to appreciate how the case has arisen. The plaintiff is a company Gemstar Seafood Limited (GSL) incorporated in Solomon Islands and formerly called Indian Pacific Seafood Limited (IPS) which owned the fixed term estates in Parcel Nos. 097-005-93 and 097-005-147 situated at Gizo in the Western Province. The plaintiff carried out fishing operations in Solomon Islands. In order to assist the operation of GSL in Solomon Islands, one Ray Marks who is director of GSL is alleged to have secured funds from the defendant and sent them to Solomon Islands. These funds were received and sent through Misi & Associates in Honiara. The Deed of Acknowledgement of Debt and Forebearance was subsequently entered into between the Defendant and Indian Pacific Seafoods Limited (“the Debtor”) whereby the Debtor acknowledges that it owes AUD410,000.00 together with interest accrued thereon to the defendant. By the same Deed the Debtor acknowledges the validity of the securities given to the defendant for payment of the debt. This Deed is the heart of the dispute between the partied in this case.

Parties to the action.

I deal first with the question as to who are the parties to this action now before the Court. The plaintiff, formerly called “Indian Pacific Seafoods Limited,” is a limited company incorporated under Solomon Islands law. It has the capacity to sue and be sued in its corporate name. The defendant is a citizen and resident of Queensland, Australia and a director of a company called Bycroft Earthmoving Pty Ltd (BE Ltd) which was incorporated in Australia under Australian Law. The parties named in this action are Gemstar Seafoods Limited and Bycroft. All the arrangements for the advance and receipt of the funds claimed were done by the two respective directors, Ray Marks and the defendant.

Nature of the Moneys lent and received.

It would also be convenient to deal with the nature of the monies said to be lent and received in this case at this stage. The success of the defendant’s counter-claim depends on the nature of those monies said to be lent to the plaintiff. Counsel for the plaintiff, sought to set out the details of the payments said to be lent and received in this case:

By way of clarification, “BE Ltd” is Bycroft Earthmoving Pty Ltd, “Gemstar (Aus)” is Gemstar Corporation Pty Ltd, “BW Solicitors” is Barwicks Wisewoulds Solicitors, “Gemstar (SI)” is Gemstar Seafoods Limited, the plaintiff in this action, “IPS” is Indian Pacific Seafoods Limited. “Bycroft” is Robin Bycroft; the defendant in this action and “Marks” is Ray Marks, the Managing Director of Gemstar (SI). As will be later noted in this judgment, part of the details of the payments set out by the plaintiff above is incorrect.

The Plaintiff’s case.

The plaintiff’s case is that the defendant when advertising for the sale of the fixed term estates in Parcel Nos: 097-005-147 and 097-005-093 in Gizo, Western Province (“the Gizo Lands”) was in breach of the Land and Titles Act and/or the Deed of Acknowledgment of Debt and forebearance. It seeks order restraining the defendant and his Directors from further pursuing the advertisement for sale of the Gizo lands and for damages suffered as a result of the alleged breaches.

Counsel for the plaintiff submitted that with regard to the alleged breach of the Act, the defendant has not complied with s.163 (2) of the Act which provides:

“(2) The charge shall be completed by its registration as an encumbrance and the registration of the person in whose favour it is created as the chargee and by filing the instrument”

Counsel further submitted that the enforcement of the debt of AUD41 0,000.00 under the charge executed in this case, could only be done under the above provision of the Act. As the said charge has not yet been registered, the defendant could not have enforced the debt until the charge is registered.

By so enforcing the debt through advertisement for sale of the Gizo lands pursuant to the Deed, the defendant is in a breach of the Act.

It is further the case for the plaintiff that the Deed is unfair and unreasonable in that it seeks to place upon the plaintiff the burden of repayment of all the amount said to be owing to the defendant when part of the monies owing were not received by the plaintiff. As the charge has not been registered, the defendant used the Deed to secure enforcement of the AUD410,000.00 against the plaintiff who contended that this cannot be done.

The defendant’s case

The case for the defendant is simply that the plaintiff, directly or through its agents, obtained AUD410,000.00 from the defendant to assist in its fishing operations in Solomon Islands. A charge over the plaintiff’s lands in Gizo had been executed to secure the amount lent to it. A Deed of Acknowledgement of Debt and Forebearance had been executed. As the charge has not been registered, the defendant is entitled to enforce its security under the Deed by advertising the plaintiff’s Gizo lands for sale.

It is also the defendant’s case that the plaintiff has admitted the debt and so the defendant is entitled to enforce the debt either under the Act or Deed. The defendant chose the latter.

The Evidence

The evidence adduced in this case were both oral and documentary. In the main, the evidence on the substantive issues are not in dispute, in particular with regard to the arrangements for the advance of funds to the plaintiff as well as the amount said to be advanced. The evidence of Ray Marks is that the plaintiff, GSL was in need of financial input to enable it to operate its fishing operations in Solomon Islands. He approached the defendant for help. The defendant agreed to assist and so on various occasions, he advanced funds, both from his personal accounts as well as from his company’s (BE Ltd) accounts, to the plaintiff through Ray Marks. Arrangements for the reimbursement of the monies to the defendant had also been agreed to between Ray Marks and the defendant. Included in that arrangement was the payment out of the Martaban litigation (if successful) the sum of AUD250,000 to the defendant. As security for the monies advanced, the plaintiff agreed to grant a charge in favour of the defendant over its Gizo lands. Further advances were made to the plaintiff thereafter to assist the plaintiff as well as to further assist in the settlement of the Martaban litigation and the total debt came total debt came to AUD410,000.00.

The amount now secured under the charge over the Gizo lands stands at AUD410,000.00.

The evidence shows that the charge over the Gizo lands in Parcel No. 097-005-147 was executed on 4 May 1999 in respect of the sum of AUD250,000.00. The Deed of Acknowledgement of Debt and Forebearance was signed on 15 July 1999. A subsequent charge over Parcel Nos. 097-005-147 and 097-005-93 securing the sum of AUD410,000.00 was executed on 15 July 1999 between the plaintiff and defendant. The Charges have not yet been registered. The defendant had subsequently registered the Deed as Power of Attorney on 15 October 1999, Registered PA No. 226.

There is no evidence of any repayment made to the defendant and the plaintiff agreed it had not repaid the defendant “even a cent.”

Findings on the evidence

The evidence in this case consisted of oral as well as affidavit evidence. There are also documentary evidence relied upon by both parties. At the centre of all the evidence as I have said earlier is the Deed of Acknowledgment of Debt and Forebearance. Having considered the evidence, I make the following findings of facts:

1. Arrangements over advances of the various amounts totalling AUD442,000.00 from the defendant and for his company. to Ray Marks and/or companies had been made between Ray Marks and Robin Bycroft (defendant).

2. Ray Marks is a Director of the plaintiff company and had arranged advances of monies for and on behalf of the plaintiff company.

3. The total amount owing to the defendant and or his company is AUD442,000.00.

4. Of the amount of AUD442,000.00, the sum of AUD32,000.00 was for Ray Mark’s personal use.

5.As security for the monies lent, the plaintiff gave a charge over the parcels of land at Gizo, namely, Parcel Nos. 097-005-147 and 097-005-93.

6. In addition to the charge, the plaintiff and defendant entered into a Deed of Acknowledgement and Forebearance to enforce the repayment of the monies lent by the defendant to the plaintiff.

7. The total amount of AUD442,000.00 or any part of it has not yet been repaid.

8. The total debt of AUD442,000.00 and the security had been admitted by Ray Marks on behalf of the plaintiff and himself.

9. The defendant, however, only counterclaims for AUD410,000.00 as stipulated under the Deed.

There may also be other factors in this case that are not in dispute but those that I have set out are those that I considered sufficient in resolving this present dispute.

Debt Admitted

As I have pointed out, the plaintiff has admitted the debt of AUD442,000.00 (410,00.00 plus a further 32,000.00 personally advanced to Ray Marks). There can be no question about this.

Much has been said about the Gemstar -v- Martaban Litigation before the Supreme Court of Queensland. A lot had also been said regarding the various meetings between Ray Marks and the defendant. At the end of all these, the fact remains and admitted by Ray Marks, that the defendant and or his company is owed AUD442,000 by the plaintiff and himself and has not been repaid until the present time. The defendant’s counter-claim is only for AUD41 0,000.00.

Who should pay what

As I understand the plaintiff’s contention, it does not dispute the fact that it owes monies to the defendant. Mr. Ashley seemed to be saying that the money owing were not to the defendant but to BE Ltd and that the borrower was not only the plaintiff but also Gemstar (Aus) and Ray Marks. Thus says the plaintiff, the defendant alone is not the appropriate party to claim the whole AUD410,000,00.

I think it is implicit in the plaintiff’s argument that Ray Marks, plaintiff and Gemstar (Aus) are all different persons just as the defendant, and BE Ltd are also two different persons. In another word, monies owed to the defendant’s company must be claimed by the company and not by the defendant. The usual argument is that a company is a separate entity from its owners and is entitled to sue and be sued under its own name.

Firstly, before I address this point, let me in a word or two, deal with the contention by the plaintiff that Gemstar (Aus) lent monies to the defendant and BE Ltd in total amount of AUD202,000. The evidence as contained in Exhibit 20 does not show this and as correctly pointed out by Mr. Sullivan of Counsel for the defendant, no monies were being lent by Gemstar (Aus) to the defendant or BE Ltd.

It is still the correct principle of law applicable to Solomon Islands that a company after incorporation has a separate entity. It can sue and be sued in its own name, it can own properties and have rights and be subject to liabilities. This principle had been firmly applied by the Courts since the case of Salomon -v- Salomon & Co. Ltd [1897] A.C. 22. It had been so rigidly applied, not only in company law cases, but also in other cases where the corporate character of the companies was an issue, even if only secondary. In some case, the inflexible application of the principle of the separate legal personality of companies, have worked hardship and injustices. The law has developed and exceptions have now been made to the separate legal personality rule. One of these exceptions is that of real control and beneficial ownerships of the company’s undertaking as was the case in Daimler Co. Ltd -v-Continental Tyre and Rubber Co. (Great Britain) Ltd [1916] 2 AC 307 where the Court disregarded the British incorporated personality of the company and considered the controlling factor of the company’s business and assets in order to determine the status of the company. That case also recognised that the factor of control of company business is important, both in terms of law, as well as in commerce and finance.

In the present case, Ray Marks, the plaintiff’s director, was the person in control of the affairs of the plaintiff company. He had to ensure the commercial venture of the plaintiff kept going and financially sustainable. To do that he had arranged advances of monies to be made by the defendant and his company BE Ltd, to the plaintiff. In the same way, the defendant who was the director of BE Ltd and who controlled the affairs of that company, entered into the arrangement whereby BE Ltd lent monies to the plaintiff. Thus all the controlling characters of the companies involved on both sides were the ones making sure that things were done in this case. As such I would agree with the contention by Mr. Sullivan that it matters not who the borrowers and lenders are in this present case.

Whether proceedings under Deed or Charge

The evidence both oral and documentary plainly shows that the plaintiff owes the defendant AUD410,000,00. The plaintiff has admitted so in Court and in writing. He is therefore estopped from denying that fact: Dabbs -v- Seaman [1925] HCA 26; (1925) 36 CLR 538. There can be no argument about the plaintiffs liability or the quantum here. The plaintiff nevertheless insisted that its Gizo lands should not have been advertised for sale and if they were to be sold, then the defendant ought to have proceeded under Part XII of the Land and Titles Act by way of enforcement under the charge executed between the parties. That charge, however, has not yet been registered. Consequently the defendant, having registered the Deed as a Power of Attorney, proceeded to enforce the debt under the provisions of the Deed, a course of action which the plaintiff did not agreed to or perhaps did not appreciate. Armed with a Power of Attorney, the defendant through his solicitors, took steps to enforce repayment of his monies under the Deed. I do not see anything wrong or inequitable about that. See Estate of Sunny Tong (1991) Civ. Case No., 32 of 1991 (Judgment on 20/11/91) (HC) and John Howden Beverly -v- Registrar of Titles (1999) Civ. Case No. 273 of 1997 (Judgment on 7/4/99) (H-C).

In reality the Deed executed by the parties in this case creates a contract between them giving rise to an equitable interest of the defendant in the properties secured under the Deed. In that form, the defendant would not be able to exercise it power of sale over the lands concerned unless sanctioned by the Court, although it is possible for the defendant to sue for specific performance of the contract against the plaintiff to repay the money owing to the defendant. It is no doubt in realising that difficulty that the defendant had protected himself by registering the Deed as a Power of Attorney under section 207(3) of the Land and Titles Act. By that registration, the powers and remedies available to a registered chargee can be exercised by the defendant who is now a registered owner of an interest in equity in the land enforceable by this Court. If the defendant had not taken this course of action of protecting his interest, he would have to wait until the charge is registered which may well turn out to be a long and uncertain waiting. The defendant is entitled to enforce the debt owing to him under the Deed.

Whether interim injunction should remain or permanently ordered.

In the light of the evidence confirming the debt owing by the plaintiff to the defendant and the process being lawfully taken to enforce that debt, it would be unjust and inequitable to allow the interim injunction granted by this Court on 11 November 1999 to continue. Further to allow it to continue would be oppressive against the defendant. Consequently, there is no basis to grant a permanent injunction as now sought by the plaintiff. The basis for such an order has gone and so must the order.

Conclusion and Order

On the evidence before the Court, the only conclusion to be reached is that the plaintiff’s claim is not supported by any evidence and it is dismissed. There will be judgment for the defendant on his counter-claim in the sum of AUD$41 0,000.00. Should that sum or any part thereof remain unsatisfied, the defendant shall be entitled to enforce it under the provisions of the Deed referred to in this judgment.

As to the costs, the circumstances of this case justify the costs to be ordered on an indemnity basis and I so order.

Order accordingly.

(Sir John Muria)
CHIEF JUSTICE